Sunday, August 17, 2014

Papua New Guinea businesses suffer high costs from crime and violence

A World Bank Group report released on Friday August 15 says that eight
in ten businesses in Papua New Guinea suffer substantial losses and security
costs as a result of high rates of crime and violence, slowing business
expansion and hampering the country’s economic development.

More than 80
percent of 135 companies surveyed said their business decisions are negatively
influenced by the country’s law and order situation, with crime significantly
increasing the cost of doing business.

The expense of avoiding criminal damage
limits firms’ ability to grow, deters start-ups, and imposes significant
long-term social costs on the country.

“Crime in
Papua New Guinea constrains businesses and threatens to put the brakes on the
economy,” said Carolyn Blacklock, Resident Representative in Papua New
Guinea for IFC, the member of the World Bank Group that focuses on private
sector development in emerging markets. “Local firms not only struggle to be
competitive as they seek to manage crime, but they also pass on these costs to
consumers via higher prices, less choice, and the absence of new products and
services. This is bad not just for business, but the economy as a whole.”The World
Bank Group report, entitled “The Cost of Crime and Violence to Businesses,”
draws on a survey and interviews conducted with the local business community,
and is the first study in the country to comprehensively assess the impact of
crime and violence on local enterprise. The report
finds that security in particular represents a significant and growing expense
for businesses. 84 percent of the country’s firms pay for security hardware,
such as installing specialised gates and security alarms, which is 30 percent
higher than the average in the East Asia and Pacific region. Hiring private
security consumes on average five percent of firms’ annual operating costs.
Companies are
also suffering direct losses averaging K89,000 ($33,000) per year from stolen
property and about K71,000 ($26,000) annually to petty theft by employees. 38.5
percent of companies reported closing their businesses early each day to avoid
becoming victims of crime, resulting in losses of income estimated at an
average of K93,000 ($34,000) per year.“Everybody
in PNG is losing money and time to crime,” said Alys Willman, World Bank
Social Development Specialist and co-author of the report.“While the
report assesses direct losses from crime and violence, we can never calculate
the investment foregone, the expansions to new products and areas that never
happened, the number of businesses that never opened their doors, or the jobs
that were never created because the costs of security were too high. These
costs are all passed on to consumers – and everybody suffers.” Businesses
are also worried about broader social costs, the report found.High
levels of crime and violence create fear, which constrains the movements of
staff and customers and stigmatizes the young, who are often seen to be
perpetrators of violence and crime. Domestic violence, in particular, intrudes
into the workplace, contributing to absenteeism and affecting morale and
productivity of staff.Official
police data, and data from Government-led victimization surveys, suggests that
crime has stabilized in the country over the last decade, though there are
significant disparities across regions. There is evidence however that violent
crime may be increasing as a proportion of overall crime, especially in
recognized ‘hotspots’ such as the Western Highlands, Madang, Lae and the
National Capital District. In Lae, incidence of violent crime more than doubled
in 2010 compared with 2008. The World
Bank report is part of its wider Research and Dialogue Series on the
socioeconomic costs and drivers of crime and violence in Papua New Guinea.
Carried out at the request of the PNG government, the report draws on an
extensive review of existing data, a survey of 135 businesses conducted by the
PNG Institute of National Affairs, in-depth interviews with business owners,
and consultations with businesses and employees carried out from 2012 to 2014.Key
findings:

67 percent of
businesses that took part in the survey said crime was a major constraint on
their business, a higher rate than in El Salvador (51 percent), Venezuela (60
percent) and Democratic Republic of Congo (63 percent);

81 percent of
businesses reported that their decisions to further invest in or expand their
operations were affected by the country’s poor law and order situation; only 3
percent said that their decisions were not affected at all'

84 percent of
companies said they pay for security in the form of security personnel or
hardware. This is significantly higher than the average of 52 percent for the
East Asia and Pacific region/

More than two‐thirds of businesses
use private security services, which costs an average of 5 percent of their
annual operating costs. About 30 percent of firms said that hiring private
security accounts for at least 10 percent of their annual costs'

Businesses reported
losing an average of K89,000 ($33,000) per year to stolen property and K71,000
($26,000) to petty theft by employees. 38.5 percent reported closing early to
avoid victimization, which cost an average of K93,000 ($34,000) per year in
lost earnings.

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